CME - CBOT - NYMEX - COMEX Daily Option Settlement Procedures

This topic discusses CME, CBOT, NYMEX, COMEX daily option settlement procedures.

This topic describes CME, CBOT, NYMEX, COMEX daily option settlement procedures.

Daily Option Settlements

CME Group staff determines the daily settlements for the out of the money options based on market activity throughout the day, on all venues (including, but not limited to, CME Globex, CME ClearPort, CME Direct and the trading floor, as applicable). Once the underlying futures have been settled the implied volatility skews will be used in conjunction with the futures settlement price to derive settlement prices for the options.

In-The-Money Options Put-Call Parity Equation

In-the-money options are settled automatically by the Exchange in accordance with the put-call parity equation, taking into account the appropriate cost of carry.

The cost of carry is rounded to the nearest minimum increment of the underlying futures contract. For all products, except the Emini S&P 500 Options, the interest rate used will be the rate on the Secured Overnight Financing Rate (SOFR) curve corresponding with the expiration date for each contract. For all Emini S&P 500 Options the daily settlement cost of carry will utilize an interest rate curve derived from E-mini S&P 500 options markets directly, as the interest rate component utilized in the calculation (detailed in SER #9055 https://www.cmegroup.com/notices/ser/2022/11/SER-9055.html).

3-Month SOFR Options Settlement Guidelines

Orders Eligible for Settlement Consideration:

1. Outright Orders (OTM only)

2. Straddles (ATM only, no contingent futures)

3. Strangles (equidistant from ATM only)

4. Call and Put Spreads (OTM/ATM only)

5. Butterflies/Iron Butterflies/Ratios (1X2 only)

6. Condors/Christmas Trees

7. Outright Options vs. Futures (market delta only)

8. Intermonth Straddle (ATM only) and Call/Put Spreads (OTM only)

Notes

• Orders not part of these Settlement Guidelines will not be considered in the daily settlement process.

• CME Globex markets will be considered for settlement purposes.

• No spreads with 2 or more legs that are in-the-money will be considered.

• No spreads that include a leg that is CAB offered will be considered.

• Put/call parity will not be violated nor will the cost of carry be adjusted.

• Traders are reminded that orders must be openly bid or offered at least two minutes prior to the close to be eligible for consideration in the settlement process. 

• Settlements should reflect mid-market prices whenever possible.

• In-the-money options will continue to be settled automatically.* 

*In-the-money options are settled automatically by CME Group in accordance with the put/call parity equation taking into account the appropriate cost of carry.